About this Author

College chemistry, 1983

The 2002 Model

After 10 years of blogging. . .

Derek Lowe, an Arkansan by birth, got his BA from Hendrix College and his PhD in organic chemistry from Duke before spending time in Germany on a Humboldt Fellowship on his post-doc. He's worked for several major pharmaceutical companies since 1989 on drug discovery projects against schizophrenia, Alzheimer's, diabetes, osteoporosis and other diseases.
To contact Derek email him directly: derekb.lowe@gmail.com
Twitter: Dereklowe

May 15, 2006

Leadership Secrets of the Data Fudgers

Posted by Derek

Drug companies (the big ones, anyway) are companies just like the rest of them. They come with all the baggage that companies making kitty litter, microcircuitry, and frozen pizzas have - all the assistant vice presidents, all the memos and paperwork, and all the management fads. Oh, especially those.

My theory has long been that the business-school people in the industry come in, get a good hard look at how things really work, and assume that something must be terribly wrong. Surely things don't have to be this way - all the craziness, the risk-taking, the uncertainty. If you people would just implement some modern management techniques, maybe we could straighten some of this stuff out!

Maybe not. A lot of things are just plain old unstraightenable, but the managerial consultant has not been born who will tell you that. No, at many drug companies, a new fad comes rolling along every few years - some new buzzword-laden scheme that promises to re-invent, re-do, re-invigorate and basically make things work like it says in the three-ring binder that comes with the off-site course where you learn it all.

But there's something holding these ideas back at a lot of science-driven organizations. The contempt that most of the scientific staff has for "modern management techniques" is hard to underestimate. Problem is, we're used to having to prove our hypotheses, and show data (with appropriate controls, yet) in support of them. But I've suspected for years that most of the management fads that sweep through the world have nothing to back them up at all, and this suspicion has been confirmed by an article by Matthew Stewart in the latest Atlantic (subscriber-only) called "The Management Myth".

Stewart, an ex-consultant, goes into some of the history and current state of the racket, and it's exactly as I'd pictured it. Most of the time, there's no data (other than anecdotal fairy tales) to back up the latest six-sigma-good-to-great-seven-habits-of-continuous-improvement craze. When people infrequently try to gather the data, it's often impossible to do. And even when it's possible, the numbers often do not confirm any hypothesis at all:

"In many of my own projects, I found myself compelled to pacify recalcitrant data with entirely confected numbers. But I cede the place of honor to a certain colleague, a gruff and street-smart Belgian whose hobby was to amass hunting trophies. The huntsman achieved some celebrity for having invented a new mathematical technique dubbed "the Two-Handed Regression." When the data on the correlation between two variables revealed only a shapeless cloud-even though we knew damn well there had to be a correlation-he would simply place a pair of meaty hands on the offending bits of the cloud and reveal the straight line hiding from conventional mathematics."

(He also mentions something that hadn't occurred to me, that the best and highest-paying customers for all this voodoo are companies that are on their way down. They'll try anything. So if you're working for a company that's going crazy with this stuff, you might want to consider that a useful alarm bell).

It is a bit anecdotal, but the management tools were being brandished in two biotech companies I had the privilege of working in as they went down. Of course, another symptom in these two anecdotes, was that "leadership" mostly used the approaches to justify what they wanted...

Management fads (and management consultants, come to that) are kind of a pons asinorum for senior management, unless one takes the cynical view that they do so solely out of a CYA impulse. But even then...

As an investor I have always been troubled when management hires consultants. After all, isn't management suppose to be the experts and isn't this the reason the Board endows them with extravagent stock options? Also, it's not just firms on the way down; I have witnessed numerous examples of Boards hiring a new CEO whose first task is to hire a consultant. It makes you wonder if the Board hired a guy/gal who knew anything at all about the company/industry? Consultants, not as bad as lawyers but...

When the data on the correlation between two variables revealed only a shapeless cloud-even though we knew damn well there had to be a correlation-he would simply place a pair of meaty hands on the offending bits of the cloud and reveal the straight line hiding from conventional mathematics.

Gives new meaning to "hand waving."

Tho it is well known that you can achieve some dandy R-values on straight lines through n-data pairs that are clearly not functionally linear. Example.

Nevertheless, when the uninitiated hear R-values like .7 and .8, some think the regression has uncovered a relationship unavailable to their own eyes.

When I worked in industry for twenty years a popular management sound byte was "paradigm shift." The same people who were swayed by high R-values tended to believe this meant healthy change was coming, whereas the skeptical camp recognized it as a portent of impending layoffs. So very Dilbertesque it was.

Well, I agree that a lot of the mgt fads are hooey, but this "we scientists are above that cuz we live in the world of real data" doesn't ring true either. First of all most scientists, expecially in industry, are followers and don't have much understanding of when to obey or break the "rules" at play. Second, the data that are collected are limited in what they say, and those limitations are most acute at the point where management-level decisions are made. Finally, unless you've been through the wringer of the complete clinical development process, scientific expertise is often too limited to be able to weight risks, because scientists are forced to compare risks in an area of expertise against something with which they aren't familiar, and the tendency is to "fear the unknown in the known" (I sound like Rummy) when this happens.

SSD, those are good points. Maybe I should have said that we should be more immune to this stuff.

What I've never been able to understand, though, are the people who've been in management for years and still go crazy for the latest thing. You'd think that someone who'd been around long enough to have seen the same exact things come back around the track would catch on.

There's a lot broken, the solution is more often than not a lot of hard work. Apropos the original post, however, sr mgt so often brings in a set of replacement ideas as an alternative to replacing the brains that hold them. It's unfortunate, but a really common trait among sr mgt types is narcisism which prevents them from accepting responsibility for failings. The problem, therefore, isn't them or their ideas but the lack of an easy structure for the little people to "buy into".
What these people don't realize is that the little people are looking at them and wondering "Is this the best we could do?"

The fat cats are generally quick to take responsibility when times are good, and equally quick to offload blame elsewhere when profits plummet. That doesn't seem to stop most of them claiming hefty salaries and perks regardless of the bottom line. Unfortunately, when the boardrooms are packed with the friends and cronies of the CEO, it takes a great deal of hissing and spitting (usually from the institutional shareholders) to displace the egregious incumbent senior management. Disregarding mud-spattered management consultants, I think it's wrong to say that some things are "unstraightenable". Some of you may remember Sir John Harvey Jones coming in to ICI in the early 80s and, contrary to all the wise heads, turning that company around from making a regular loss into a record £1bn profit in less than 18 months. How? By clearing away a lot of dead (and live) wood, by doing away with tradition, by thinking clearly, by acting swiftly and decisively. Would it be so far-fetched to imagine a Sir John doing the same thing today with Pfizer or Astra Zeneca or Merck or ?

Daen, I agree that there's plenty wrong, so it's not like nothing needs to be fixed. And it's true that there are some examples of things that actually have been turned around.

But I'm willing to bet that Sir John didn't spend a lot of time talking about re-inventing the five whatevers and the seven this-and-thats. He just came in and started whacking away, which is probably how most really big jobs of this sort get done. What drives me nuts about the management fads is the assumption that they'll change how people think and feel, when very little that's contained in most three-ring binders has the power to do that after a three-day training course.

The regression story reminds me of something from Stanislaw Ulam's autobiography. He and von Neumann were at a seminar at Los Alamos after the war. The speaker had put up a slide with a cloud of points and had (rather optimistically) drawn a line through them. Von Neumann leaned over to Ulam and whispered, "Well, at least they lie on a plane."

I've long debated internally whether senior managers actually believe in management fads (operationally defined as business advice featured prominently in airport bookshops) or just appear to do so through a cynical desire to appear "with it" to the Street.

Sadly, I've tentatively concluded the former is more typically the case, since at least the senior managers I've dealt with are just not that clever (some of them making very heavy weather of the mole concept, for example). The management consultants, on the other hand, are generally intelligent, and most know perfectly well they are conning managers.

Derek touched tangentially on the propensity of authors of management books to choose prime numbers for their programs (The 3/5/7 Secrets of the True Path to Business Enlightenment). Actually, irrational numbers would be more...fitting.

Ah yes, Six Sigma. I lived through that (and many other fads) at IBM. I remember clearly one day at a presentation (to a large audience) of Six Sigma at that company, when one engineer in the audience stood up and asked "does this apply to managers too"? Of course, the presenters/consultants didn't realize that while they might be able to fool most people with no mathematical background, the audience in front of them were not what they were expecting. The answer to the question above was yes, it applies to everyone. So the questioner continued "so that means that, assuming your average management career is 30 years, And as a manager you make 16 decisions a day, 7 days a week, that means that between any two of you, you get to make 1 flawed decision in your entire careers."

The response from the consultant was somewhat flustered, but boiled down to the opinion that, no, it did not, after all, really apply to management decisions. Another engineer (this one with a Phd in engineering physics and a second Phd in math) pointed out that by the same reasoning it did not apply to lines of code either.

OK, time for me to jump in with a rather contrarian view (goodie, something new and different from me 8-). There ARE a lot of snake-oil salesmen out there in the management consulting space, and far too many books on the way to magicially make your workers produce on command for lower wages and be happy about it.

On the OTHER hand, there are some very good books out there on leadership and organizational behavior, some of which are written by working management consultants. I can name some of my favorites if anyone really wants to hear them, but what I have found is that the good ones don't try to inspire a cult around them that claims to be the one true way. I'll even include the 7 habits in this category, with reservations. The book itself has some reasonable advice about getting things done. The fact that there are stores selling post-yuppies faux-alligator skin notebooks with custom spaced rings and a pouch for their blackberry is, in some sense, proof that it has worked for enough people that they are willing to buy anything associated with it to try and get a mythical edge. I'm not sure who I would blame for the lunacy there.

Also, I am not sure I would say that hiring management consultants and conducting seminars is proof that a company is in trouble. I worked for one company that did jump onto the TQM/continuous improvement bandwagon to try to save itself, and it imploded within a year (try to come up with meaningful metrics in tech support that aren't based solely on how quickly the calls get closed). But every company has a culture, and just because you happen to be a scientist doesn't make you immune to that culture. I'd rather have the CxO call in a motivational speaker/management consultant/teambuilding trainer and try and address perceived problems that way than have them try to ham-hand their way through it themselves if they think organizational change is needed. Now, if they flail from method to method and they can't decide which one they themselves want to adopt, I will agree that is a problem.

Perhaps part of the problem with 6 sigma and other metric oriented methods is that they appeal to scientists and engineers that were promoted into management (possibly in fulfillment of the peter principle) who are adrift without "hard" data to make decisions on, and to other managers who just suffer from math envy. I don't think it's the books and consultants that are really the problem, just the people who indiscriminately try and blindly apply them.

I just did a quickie course on Six Sigma. It is a set of "techniques"/concepts derived from the manufacturing world, especially Motorola and Toyota. They are typically couched in a lot of jargon, but are in essence just basic good business practices.

The real difficulty lies in how it is applied to research specifically. I think one fundamental point about research, which most people outside it fail to realize, is that about 90% of the stuff you try does not work! So, while one may in principle optimize a particular process in R&D, I don't believe there is a *management* technique that will allow you to get around the high degree of failure associated with research.

I think there is certainly a place for Six Sigma concepts, especially in large companies, but I would argue they are more applicable to non-research tasks (supply chains, compound management, IT, procurement/purchasing, etc.) Won't help you discover a drug any faster though.

Apologies for not remembering the source but the best comment I ever hear on metrics was 'you get what you measure' and this applies to the performance of the people doing the measuring as well. So it's much easier to rate the performance of a management consultant on a short term number ie increase of compounds going into screens per year rather than the more meaningful number of number of preclinical development candidates or the even more meaningful number in phase 2. Hence the debacle of combinatorial chemistry libraries or screening in pools.
My only other comment on management fads is the way they ripple from company to company like a virus ie centres of excellence vs centres of expertise, 80-20, fast-to-fail and yes the glorious 'paradigm shift'.

Anyone care to comment on Wyeth's whole-hog purchase of the new Accenture way? This looks brutal to me, particularly in light of the observation that hallway chatter can be cause for dismissal. Perhaps not a fun place to work.

Wyeth clearly has bought into Accenture and their theories in a huge way. I left Wyeth a couple of years ago. While I was there the metric was 12 compounds into preclinical per year with the goal of 1 NDA a year. Now that this has been in place the number went up to 15 right after I left and now its 18. Gee, I wonder what happened? Could it be the failure rate has dramtically gone up as project leaders try to meet this insane metric and push something into development that has no chance of being a drug.
Now Wyeth thinks the Accenture way has been so successful they have gone and drunk the Kool-Aid. These metrics are the triumph of accounting over science. In my opinion, I think Wyeth will eventually collapse under the weight of these metrics and as is usual in these cases Accenture and Ruffalo will move on to try the next paradigm shift in six sigma business practices.

SSD, I've been gone almost two years and I'm still writing letters of recommendation for my ex-colleagues. I worked at the ex-GI and Wyeth is definitely no GI and that is the biggest reason I left to go back to a company that feels very much like GI used to.
I'm definitely not built to work in the bean-counting culture that is Wyeth, these days.

Demosthenes,
I'm at Wyeth now -- we probably just missed each other b/c I joined about a year ago. FYI, the metrics went from 12 to 15 (not to 18 -- yet). The reason was due to increase failure's in PhaseII trials. Management says (and I believe them from the data they showed) that this increased failure rate been throughout the industry. It's not just a problem at Wyeth. From my perspective (and from other's I work with) there is actually a rather positive view of the various metrics that are now used. The famous "12 development candidates per year" is only one of MANY metrics that we're supposed to be meeting every year -- it's just the most "public" of the metrics. Everyone hates to have thier performance measured, but management has to at least TRY to measure and manage output. Wyeth may not be doing it perfectly, but they are trying hard and having some success. That's more than many other companies in this industry can say.
(incedently, Wyeth is on track to submit 5 NDA's to the FDA within the next 12-18 months -- to me, that makes it hard to argue that the system doesn't work)

I think Demosethenes touched on a critical aspect: the impulse to apply accounting-type methods to research (e.g., "if we spent 30% of the money, we must be 30% of the way there, right?", and "We're doing great - invention disclosures are up 20%", that sort of thing). Business guys commonly loathe unpredictability, and all surprises, good or bad. Their model is GE's (obviously massaged) earnings chart, which can be used as a straight-edge if a ruler isn't to hand.

The problem is that running research takes judgment. Counting, measuring, etc. are just a way of those lacking such judgment to deal with the uncertainty of the research enterprise, and if necessary, to cover their own asses to others who also lack the requisite judgment.

The tendency is also driven by hubris, that these rugged "take no prisoners" managers can enforce predictability and order on anything, rather like those who tried to plan the Soviet Union's economy. They lack the humility to accept that, with the best will in the world, some things simply cannot be controlled, and must just be accepted. Growing up, I believe it's called.

If you think that I believe this issue is only true at Wyeth, that's not true. The increased failure rate throughout the industry is because other companies have the same goal of 1-2 NDA's per year.
My real point is that drug discovery is not accounting. At the end of the day you can't just balance all the positives and negatives and have it even out.
As companies attempt to do this they push more candidates into development that the project team knows has real problems. These problems are unlikely to be worked out in development and so the failure rate increases. More worrisome is that in an attempt to meet timelines defined by metrics; project teams shy away from making compounds or decisions that will move the timeline for fear of not making their deadline. In my opinion that's not science. Its not a problem only at Wyeth, but a number of companies. When I talked to people about why I was changing jobs most of my friends at other big pharma nodded their heads resignedly. So I don't think this is a one company problem. I do think it is a problem of trying to apply metrics to an industry that is notoriously hard to quantify.
I don't have an objection to measurement standards I just think that in our industry they should be project specific and not so general.
(Incidentally, those 5 NDA's were the low-hanging fruit that Ruffalo inherited. Three of them were projects that did need to be pushed into development instead of having the project team continue to try to design the "perfect" molecule. One of those was the project I spent most of my time at Wyeth involved with and was actually pleased to see the metrics move it along as I thought we had a candidate and as far as I can tell from outside still do. The real success of these metrics will come if the fruit of the last three years produce NDA's in the next couple of years, we'll see.)

Lester T., Dean of the Wharton school gave a similar assessment back in the late 80s on the value of B-Schools to train people how to run companies... without ever having a grasp of what the company does. Bright man that he is, he missed the point badly, as does your reference at the Atlantic. The purpose of a business is to make money. This is it. And its ok to be wealthy. While there have been dire predictions on the endgame for MBAs, wealth and productivity just keeps on going up. Its because we manage well. I'll be the first to agree with you that large companies generally do not develop technology well. The reasons for this should be obvious, whether one has attended an MBA program, or not. Large companies are to be harvested, slaughtered, parceled and sold, in a process called creative destruction. If one finds self in a "six sigma etc etc" environment, and one is uncomfortable, the action is clear. Leave, and seek/apply/qualify and join the organization that is in a better matched phase of its existence. Regards the tee hee and all that, I point out that Norman Mailer advised the left in matters political; Its all well and good to be smarmy and poke fun, but no significant change or progress to your goals will occur. It will just be a war of emotions. We need our talent located in companies that are in the early stages of development and growth. That is why these programs are in place, to offend and put off and disgorge the entity of unneeded expenses. Companies are not forever, they have limited life, and eventually are properly slaughtered.

As an ex-scientist turned business guy without an MBA, I have always been amused by seminars and workshops that talk about management and marketing methods. Many of those methods are actually quite sound, and if you dig in deep, make common sense. However, sitting in a crowd of scientists, most of whom are obstinate and cynical as they come, some of the jargon just seems completely misplaced. While a lot of science types do not understand, nor want to, the realities of running a business and the associated pressures, going at them with a lot of jargon is definitely not going to make them believers either. In fact, that is likely to have the opposite effect.

Thanks wexpat!!! I felt bad about my double post but you made me look small with your dekatria post.
I agree that those who don't like the six sigma stuff should look for somewhere else to work. I know that was my feeling. Your other option is to learn to live with it as SRC has done. Plenty of room for all of us to find a place to be happy and still make money and do science.
The only fallacy here is to think there is only one right management model.

Many people in business academia shake their heads at some of the stuff that gets lapped up by managers. On the other hand, managers face difficult, intractable problems and naturally cast about for anything they think might help. In the case of popular business books, I think they often just mine them for insights or inspiration that seem interesting or relevant--they don't buy into them the way a scientist might buy into a theory.

When it comes to consultants, the news is scary. I heard a panel of top strategy consultants at an academic conference last year explain that CEOs won't read anything over a few pages, that they aren't interested in understanding cause and effect, and that they want quick answers that apply to whatever their current preoccupation is.

Nevertheless, competitive pressure and managerial pragmatism have led to considerable progress in certain areas of management. Commenters above are 100% correct that any particular technique or discipline is most likely going to be ineffective unless applied to the appropriate problem. One of the biggest flaws in the consulting/fad game is that no one spends any time trying to pin down the limits of applicability of a given idea.

I put drug discovery up there with oil prospecting and moviemaking as inherently highly uncertain enterprises with feedback that comes only after significant resources have been committed. In all three industries, there is psychological pressure to tame the built-in unpredictability through appropriate ritual. Instead of propitiating the gods or using divination, managers use focus groups or numerical targets or some such. So long as such rituals just waste money and don't make the real work even less efficient, they may be tolerable to shareholders--you may have to pay managers way more to get them to work at a place where they are forced to emotionally confront the radical uncertainty and unfairness of success and failure.

Exercise for the reader: how do direct mail marketing and semiconductor manufacturing, which also both involve zillions of random factors that can't be predicted scientfically, differ from oil exploration or drug discovery?

I'm thinking back to Michael Corleone, in the Godfather. Now that was a CEO. (Al Pacino, not the Marlon Brando character) Michael was the son who wanted to go legit, but ended up running the family, alas. He fired the consigliere (Robert Duvall), and made his own decisions. Sometimes he would send his spies into the field to smoke out the traitors (data collection). But mostly he made decisions based on his own judgment.

Then again, the consigliere (Robert Duvall character) had some good advice: "Now we have the unions, we have the gambling; and they're the best things to have. But narcotics is a thing of the future. And if we don't get a piece of that action, we risk everything we have. I mean not now, but, ah, ten years from now."

We talk like management is another species. How many presidents, VPs & directors have drug discovery/development experience. Lots. They are us under a different set of pressures with a different set of goals. Unfortunately we get to become them for reasons that do not always reflect our ability to manage or lead. To those of you with subordinates, remember that.

My friends who do consulting work for big pharma and others say it's just impossible to change anything without the leaders buiying in, and the leaders are usually the ones that would need to change their behaviour the most and feel they have too much to lose. Based on my own working experience, managers tend to want their subordinates fixed so they can keep doing things the "right" way with the results that they want. Most of the major problems that crop up come from leaders hiring experts and disregarding the advice they are paying for.

"The purpose of a business is to make money. This is it. And its ok to be wealthy. While there have been dire predictions on the endgame for MBAs, wealth and productivity just keeps on going up. Its because we manage well."